How does the Bulk Sales Act or tax clearance protect me when buying a business in Ontario?
The Bulk Sales Act no longer applies: it was repealed on March 22, 2017, and buyers of business assets no longer have to follow bulk sales procedures. Protection now comes from separate, specific checks, and which ones apply depends on the seller and the deal.
For WSIB, an asset buyer should request a purchase certificate before the date of sale, and it is valid for 30 days from issue. The WSIB issues one only if the seller's account is in good standing, with amounts paid and reports filed. Retail Sales Tax Act s. 6 still applies to a bulk sale by a seller who holds or must hold a vendor permit, and a buyer who does not get the duplicate certificate is responsible for the seller's unpaid taxes, penalties and interest.
If the seller is a non-resident selling taxable Canadian property, the buyer may have to remit 25% of the excess of its cost over the certificate limit unless a CRA clearance certificate was issued. A buyer is not liable if, after reasonable inquiry, it had no reason to believe the seller was non-resident. In a share purchase, no WSIB purchase certificate is required.
Key takeaways
- Ontario's Bulk Sales Act was repealed on March 22, 2017, and buyers of business assets no longer have to follow bulk sales procedures.
- A WSIB purchase certificate must be requested before the sale date, lasts 30 days, and is issued only if the seller's account is in good standing.
- If the seller holds or must hold a Retail Sales Tax vendor permit, a buyer who does not get the duplicate certificate is responsible for the seller's unpaid taxes, penalties and interest.
- If the seller is a non-resident and no CRA clearance certificate was issued, you may have to remit 25% of the excess of your cost over the certificate limit, unless you made reasonable inquiry and had no reason to doubt residence.